Legal Ease: Top 5 Tips for Reviewing Agreements
Have you ever picked up a contract that's crossed your desk and said to yourself, "What's the point of reading this? I'm not going to understand it." Well, here are 5 steps that can help. Remember, you know more than you think you know.
Print It.Printing an agreement and reviewing it on paper helps to set the aside time for the task of reviewing the agreement. I find reviewing potentially complicated legal language on paper helps me to better hone in on the words, and provides me with better focus to read and more importantly, comprehend what's written. It's how I do it in my practice.
Take The Time And Read It.In my office I require my clients to read their agreements. The reason is that regardless of how well I know the law, you know your business best. So, I recommend to print it, set aside some time, and read it.
On the first read, read the agreement as you'd read the newspaper, getting the "who, what, when, why" or the "story" of the agreement. Look for what the title of the agreement is for clues.
You may not understand all of the agreement but I assure you, you'll understand much more than you think. Whenever I have tasked my clients with this chore, they are able to spot 90% of the issues and they always present me with some great questions and insights on what's in the agreement. We are all much smarter than we think we are.
Where to Focus - First 3-5 paragraphs.After you understand the "story" of the agreement, focus your attention on the first 3-5 paragraphs. Depending on the length of the agreement, most of the action is happening in these first paragraphs. (If the agreement is over 30 pages concentrate on the first 10-15.)
Ask yourself, what is the agreement about? Who's tasked to do what? By what date? For how much? These points should be clear. If they're not, it's likely not due to your lack of understanding but due to lack of clarity of the agreement.
Look for headings and how paragraphs or sections are titled and numbered which will give you clues as to what they are about. Also notice if the numbering is off or doesn't make sense, this tells you that you if you're confused, there's a reason.
Then jump down towards the end of the agreement and look for the indemnity clause. There may not be one but if there is, focus on it and find out which party is responsible. Indemnity clauses provide an agreement between the contracting parties as to which party will pay or "compensate for the loss" in the event of the occurrence of some specified circumstances. For example, in the event of a lawsuit, which party will be responsible for payment. The party responsible may be referred to as the "indemnitor" who is "indemnifying" the other party, also referred to as the "indemnitee."
Sharpen Your Pencil.Use your pencil and circle words and sentences you don't understand. Use a dictionary to look up words and the internet to look up legal phrases. Substitute your own words for those you don't understand and re-write key sentences. Trust yourself and what you think the agreement is saying. Don't get bogged down or frustrated if you don't immediately understand. Walk away for a while and return to it. Some agreements are so badly written that I often tell my clients that if they don't understand what it's saying, it's unlikely that I will either. Keep in mind that lawyers also struggle with legalese and badly written agreements.
Call An Attorney.Whatever your business you're likely accustomed to a certain type of agreement crossing your desk. These tips can help you to understand them better to clarify or negotiate their terms. Don't be afraid to ask the other side for clarification (I do it all the time), but do your homework first. However, if you're stumped or the agreement is unfamiliar, overly long and complicated, get help. Call an attorney. Many transactional attorneys like myself charge a small fee for a contract review and consultation.